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As a long-time lurker, infrequent commenter and someone who has worked in the rightfully disparaged Healthcare Insurance industry for the last 25 years, I'd thought I'd pipe in on what's going on behind the headlines in the industry.  Specifically what the Patient Protection and Affordable Care Act (PPACA or ACA or Obamacare - I will use them interchangeably below) requires of health care payers (insurance companies) to do administratively to streamline operations, reduce costs and, more importantly, make them easier to work with from a providers' perspective,  reducing their administrative costs as well.  There is some wonky stuff below but hopefully info that helps everyone understand some of the hidden benefits of the ACA - follow me below the orange tidal waves for more details...

Back in 1996 Congress passed the Health Insurance Portability and Accountability Act (HIPAA) which contained much more than the COBRA, Privacy and Security components that most know about.  a major component of this legislation addressed the on-going issues in health care industry regarding electronic transactions.  Specifically, while the manufacturing industry had been using electronic business transactions for years, perfecting their use and streamlining the process, the health care industry, with access to the same technology basically ignored the benefits of moving to an electronic standard for claims processing, eligibility status, payment processing, etc.  

The Administrative Simplification portion of HIPAA aimed to put the payers on a path to more efficient and accurate transactions by mandating that they be able to accept and respond with standard Electronic Data Interchange (EDI) transactions by the spring of 2003.  The Centers for Medicaid and Medicare Services (CMS) was charged with enforcement of the Administrative Simplification provisions of HIPAA.  Well, we all know who was in charge of things back in 2003 and needless to say, while most health payers implemented many of the transactions (Claims, claim status, eligibility status, remittance advice, enrollment, etc.), implementation was fragmented and inconsistent from payer to payer.  So while dealing with a major Blues payer or an Aetna, as a provider you had to submit electronic data one way, while dealing with a local HMO,  even another Blues payer or Cigna, you may have to submit electronic transactions slightly differently.  Also, responses from payers differed greatly too, some using standard codes in a very generic way, e.g. electronic response not possible, etc. while others offered much further detail.

This is where Obamacare is going to make a difference in Administration.  The ACA requires that payers implement Operating Rules.  

What are Operating Rules?  An industry group, the Council for Affordable Quality Healthcare (CAQH) put together a group of more than 130 organizations - representing payers, providers, vendors, government agencies and standards-making bodies - and called them the Committee on Operating Rules and Information Exchange (CORE).  This group was charged with looking at the Administrative Simplification provisions of HIPAA and putting forth a plan to streamline the process and improve its accuracy and "usability."  

A majority of this group's recommendations made it to the ACA and have been subsequently finalized and approved as "final rules" by CMS.  As a result, payers are required to do the following:
* offer real time electronic eligibility and claim status transactions to providers

* use error codes and response codes in a systematic, clearly defined way - no more generic responses

* respond to all real time requests within 20 seconds (avg over month)

* respond to all batch (bulk) requests within one business day (avg over month)

* the payer's system must be available 86% of the time (based on 7/24 week), this includes scheduled downtime

* Companion Guides (documents published by payers so providers understand payer-specific rules for electronic transactions) - must use a specific template mandated by CAQH CORE and contain all (applicable) elements of the template

* if the member/patient name submitted from a provider in the transaction differs from what the payer has on file, the payer must "normalize" the names to try to match them and return to the provider what is housed in their system if it does not match.  A large percentage of electronic transactions are rejected for name mismatches - this should reduce this issue significantly.

* Payers must accept alternative member search data (last name, first name, date of birth) when the member identification number is not available from the provider - this is important in emergencies.

* Payers must provide a standardized enrollment process for providers to sign up to receive Electronic Remittance (ERA - payment statement = Explanation Of Payment) and Electronic Funds Transactions (EFT) eliminating a huge amount of paper.

* Payers must offer to pay providers via EFT if the provider requests payment via this method.

* Payers must release payments (EFT) to providers within 3 days of release of the ERA.

The vast majority of the Operating Rules fall upon the payers to implement and support.  Deadlines have already passed for implementation of much of the above (1/1/13) but as usual the Healthcare payers have pushed back and got CMS to hold back on enforcement of the new rules until 3/31/13.  The EFT/ERA rules have to be in place by 1/1/14.  

An important difference between the original Administrative Simplification provisions of HIPAA and the ACA's Operating Rules are that enforcement and penalties associated with Operating Rules is putting a HUGE scare into boardrooms of the payers.  Under the ACA CMS has assigned oversight and enforcement of the Operating Rules to the Office of E-Health Standards and Services (OESS) which will be charged with audit and enforcement of the Operating Rules.  Under HIPAA enforcement was done on a "complaint basis" - i.e. CMS would only step in if there was a complaint filed for non-compliance.  Now OESS will actively audit and enforce the standards.  

Another HUGE component of the Operating Rules is that Health Plans must attest to their compliance with the Operating Rules with CMS by 12/31/13.  The payers must file an official statement of compliance with CMS by the end of this year.  Should a payer not be compliant by that date, willingly defy compliance or simply lie that they are compliant, they are subject to huge penalties.  $1 per covered life per day for non-certification up to $20 per covered life per year. Double penalties for false statements filed with CMS.  If you do the math this could result in $MILLIONS in penalties if the payers are not compliant.  Now you know why they are frantically scurrying to get these rules in place.

The expected positive impact of these rules was also studied by CMS (and others) and the savings to both providers and payers is enormous.  Simply streamlining the process that providers use to confirm patient eligibility and claim status is expected to save providers $millions and the industry overall in the $billions. If you think about it, doing these transactions electronically and accurately, saves provider's admin staff from the follow-up calls to the payer, saves the payer from having to staff enormous call centers with folks that confirm this information for providers, etc.  Elimination of paper checks and paper remittance advice (which can run hundreds of pages for some providers/hospitals) will save both $ and resources (paper from trees).  

There are many things in the ACA that are frustrating for many of us in the progressive community, and until we get single-payer healthcare, we have to rely on components of Obamacare to make the system more efficient and less costly.  Operating Rules are a great step in that direction.  The above rules are just Phases I, II and III of the rules; expected in 2014 are Phases IV and beyond which will address claims transactions and others - further streamlining and pushing the industry toward a more efficient transaction model.  So there are "pearls" in this legislation after all, you just have to dig a bit deeper than most want to... Peace

References:
CMS final rule for Phase I and II of Operating Rules: Operating Rules

PPACA (ACA or Obamacare): Obamacare

11:10 AM PT: Recommend List - I'm humbled and honored!  Mak

6:29 PM PT: Sorry Kos, I used two spaces after my periods!  lol

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